In a breather to Indian Energy Exchange (IXI) and Power Exchange India Limited (PXIL), the Central Electricity Regulatory Commission (CERC) has given a one-year extension (up to January 20 2014) to comply with the regulatory provision on statutory shareholding pattern.
According to CERC's regulations, any shareholder other than a member of the exchange can have a stake of up to 25 per cent. A member of the exchange can have five per cent shareholding, subject to all members of the exchange together having a stake of up to 49 per cent. Power exchanges that had received approvals before January 21 2010 had to achieve the shareholding pattern within three years - by January 20, 2013.
In its petition, IEX had said Financial Technologies, which held 100 per cent equity in the exchange as of June 2008, had reduced this to 44 per cent. An IEX spokesman told Business Standard, "In the petition, it is submitted Financial Technologies has expressed its inability to bring down its shareholding to the desired level and has requested an extension of three years. However, CERC has granted one year."
PTC India Financial Services has reduced its stake from 26 per cent to five per cent, while Tata Power, Reliance Energy, Adani Enterprises, IDFC, Lanco Infratech, Rural Electrification have brought their stakes from five per cent to 4.12 per cent each. PXIL said the NSE stake had been cut from 50 per cent to 32.57 per cent, while the stake of NCDEX was reduced from 50 per cent to 28.23 per cent in March 2010.
GMR Energy, Gujarat Urja Vikas Nigam, West Bengal State Electricity Distribution Company and Tata Power Trading Company, members of PXIL, hold more than five per cent of the share capital. These stakes have to be pruned to five per cent each. A PXIL spokesman said, "We are happy about the development and are confident we will be able to comply with the CERC regulations within the extended time frame."
IEX and PXIL had, in separate petitions to CERC, raised the challenges of volume (two per cent of the total generation of electricity) being traded in the exchanges, the absence of long-term contracts and a clear and defined policy to implement open access, stagnant volumes of trade and other hurdles related to coal. They added these factors made it difficult to reduce the shareholding, in line with regulations. CERC said the challenges cited by the exchanges appeared to be genuine. It, therefore, granted them additional time to meet the shareholding norms.
According to IEX, one of the options to reduce the stake is to sell 5.14 per cent stake through private equity (PE) sale or offer for sale. It could also increase the exchange's base equity capital to bring down the Financial Technologies stake to 25 per cent. However, IEX said no private equity investor was willing to buy such a small stake and the company didn't need additional funds to raise its capital base.